The banks eschew the practice of selling mortgages into the market as soon as they are originated. Instead, these lenders keep the loans in their portfolios, waiting until they feel the time is right to act.

The $500 million-asset bank recently securitized $50 million of mortgage loans that were in its portfolio. The loans carried fixed rates that, because of rising interest rates, would have been a drain on the bank's earnings, Mr. Hynman said.

John Baity, the new treasurer at First NH Bank, is preparing a similar strategy for the $4-billion asset Manchester, N.H., institution. Mr. Baity said he found the approach useful in his last position, as treasurer of Chemical Banking Corp.'s $6 billion-asset New Jersey unit. Chemical sold an average of $20 million a month from its portfolio, he said.

The sales "allowed us to keep our exposure at appropriate levels," Mr. Baity said. In addition to providing protection from interest rate risks, loan securitizations can supply a portfolio with necessary liquidity, he said.

Choosing which loans to securitize is the toughest part, Mr. Baity said. And, based on the complexity of the selection process, both he and Mr. Hynman turned to an outside firm for help. Their choice: First Tennessee Capital Assets Corp., a sister unit of First Tennessee Bank's busy bond division.

"It's very difficult to access and interpret the performance of a mortgage loan portfolio," said Jerry Hubbard, president of the capital assets group. His unit has the time and the resources to pore over the various loans to make the right selections, Mr. Hubbard said.

Questions to be considered include the number of loans in the portfolio, prepayments, the original and current principal balances, the weighted average coupon and remaining maturity, the appraised value, and the home's location.

Mr. Hubbard said he has found that many community banks "don't know exactly what's in their portfolio or what its value is." By methodically taking apart the portfolio, "we're able to give them information they don't normally have," he said.

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